Pieces for pro-poor market acceleration are
coming together
CG Meeting, May 13, 2014
2
Key messages
• Our mission has become global development priority
• In-country progress is being made
• Pro-poor market ...
3
Post WWII: Aspiration for universal employment
& social protection
“Everyone has right to:
• Standard of living adequate...
4
Reality 60+ years later: Half the world remains excluded
~50-60%
with
informal
jobs
40+%
below
$2/day
~50%
w/out any
soc...
When given opportunity, poor families improve their lives
5Source: Bandiera, Oriana/ Robin Burgess et al. 2013. Can Basic ...
Country embrace of Financial Inclusion as important tool
6Source: Finscope Surveys, Kenya, Rwanda and Uganda. http://www.f...
7
2009
2011/12
2013
• G20 embrace
of Financial
Inclusion as
pillar of
development
agenda
2014
• 50+ countries
making
natio...
8
Better
understood
demand
Viable business
models at base
of pyramid
Digital innovation
increasing
scale and
lowering cost...
Importance of understanding demand-side context
9
Game
Advice Relevance
Insights-based approaches: MicroEnsure example
“Life is difficult
and everyone has
their own
problem...
11
Share of domestic depositors
Percent, 2012
Return on equity
Percent, 2012
Source: Xac Bank Annual Report, 2012; Khan Ba...
Replication and acceleration of digital success
12
Source: Safaricom M-Pesa timeline on http://nchinampesa.safaricom.co.ke...
Potential for rapid scaling of new services
• Banking partner
with no previous
retail business
• M-Pesa
transactions
histo...
14Source: CGAP Teams
Continued proliferation of Digital Finance innovations
Water
Energy
Agriculture
Transportation
Health...
15
Pay-as-you-go access to water: Sarvajal example
• “Water ATMs” dispense
reverse osmosis-filtered
water against pre-paid...
Public sector actions: India example
Example actions to date
Source: RBI Committee Report on Comprehensive Financial Servi...
CGAP V: Recommitment and priorities
20
CGAP’s Mission
Shared Vision
A world where everyone can
access and effectively use ...
18
Re-introducing the Vargas-Hancco family
Helping people improve their lives
19
The Vargas/Hancco Family
Advancing financial inclusion to improve the lives of the poor
www.cgap.org
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The Pieces for Pro-Poor Market Acceleration are Coming Together

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At CGAP's 2014 annual meeting, CEO Tilman Ehrbeck gave this presentation to the board. Overall, CGAP's mission of advancing financial inclusion for the world's poor has become a development priority, with significant in-country progress made. Pro-poor market development at scale poised to take off, and CGAP’s priorities aligned to accelerate opportunities.

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  • KENYA:
    Increased market share of non-banking financial institutions (more than doubled from 7.5% in 2006 to 17.9% in 2009)
    survey attributes improved performance of non-banking financial institutions to the use of money transfers through the M-Pesa product.
    In the 2006 survey, only 16.5% of respondents received money transfers, but by 2009 this had grown to 51.8%.
    In 2006, the most popular way to send money was using friends and family. 
    M-Pesa is now the most popular way to send money and is used by 39.9% of all adults.

    RWANDA:
    The Umurenge Savings and Credit Cooperative (Umurenge SACCO) initiative was launched in 2009 to reach out to areas unattractive to banks.
    The aim was to establish at least one financial service provider in each administrative sector.

    UGANDA
     
    In 2009, 72% of the population aged 18 years and above are financially served with 29% formally served (21% using banking services +8% using other formal financial services) while most of them use informal financial services (43%) and 30% are un-served.
    In comparison to 2006, there is an increase in the proportion of those using financial services from 57% to 72% in 2009
    More people informally served (29% in 2006 to 43% in 2009), fewer people are completely excluded (43% in 2006, 28% in 2009)
    Few change in the use of formal financial services 
     
    Why is there so few change in formal financial services?
     
    Government interference has had very little impact
    Attempts to increase the formal is not bearing fruit
    Lack of trust in formal providers.
    Formal products complement not substitute informal products
    Minimum use: just transactions.
    Partly ignorance but mostly convenience.

    Tanzania
    Informal falls from 28.8% in 2009 to 15.8% in 2013
    Percentage of completely exclueded people in this time falls from 55.4 to 26.8%
     


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    Add re: next strategic framework talking pt…. Not here?
  • The Pieces for Pro-Poor Market Acceleration are Coming Together

    1. 1. Pieces for pro-poor market acceleration are coming together CG Meeting, May 13, 2014
    2. 2. 2 Key messages • Our mission has become global development priority • In-country progress is being made • Pro-poor market development at scale poised to take off • CGAP’s priorities aligned to accelerate opportunities
    3. 3. 3 Post WWII: Aspiration for universal employment & social protection “Everyone has right to: • Standard of living adequate for health and well- being of himself and of his family, including food, clothing, housing and medical care and necessary social services • Security in event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control” UN Declaration of Human Rights, 1948
    4. 4. 4 Reality 60+ years later: Half the world remains excluded ~50-60% with informal jobs 40+% below $2/day ~50% w/out any social security coverage 50+% w/out formal financial account
    5. 5. When given opportunity, poor families improve their lives 5Source: Bandiera, Oriana/ Robin Burgess et al. 2013. Can Basic Entrepreneurship Transform the Economic Lives of the Poor. BRAC Working Paper. Earnings four years after program end (in Taka) Control group Graduation program + 38% 6,370 4,616 Survey highlights • Higher income due to more hours worked, not higher productivity • Extra income split between consumption and savings • Poor adopt working patterns of rural middle class
    6. 6. Country embrace of Financial Inclusion as important tool 6Source: Finscope Surveys, Kenya, Rwanda and Uganda. http://www.finscope.co.za/pages/default.aspx Population served by formal institutions (in %) 26 41 28 29 21 42 16 57 2006 2009 2006 2009 2008 2012 2009 2013 Kenya Uganda Rwanda Tanzania • Growing importance of non-banking financial institutions • Some country- specific solutions (e.g., SACCOs in Rwanda) • In some cases, informal use rising in parallel (e.g. Uganda)
    7. 7. 7 2009 2011/12 2013 • G20 embrace of Financial Inclusion as pillar of development agenda 2014 • 50+ countries making national Financial Inclusion commitments • World Bank aspiration of “universal access transaction services/ accounts” by 2020 • Efforts to integrate financial access as enabler into UN post-2015, MDG successor framework Strong global political tailwinds
    8. 8. 8 Better understood demand Viable business models at base of pyramid Digital innovation increasing scale and lowering costs Supporting national policies and regulations Pieces for market acceleration coming together
    9. 9. Importance of understanding demand-side context 9
    10. 10. Game Advice Relevance Insights-based approaches: MicroEnsure example “Life is difficult and everyone has their own problems.” Insight: Importance of Everyday Realities “I play games on my phone and watch Novellas to relax.” Insight: Small Pleasures Insight: Thirst to Learn “Education is very important. I would like to see my son live a good life.”
    11. 11. 11 Share of domestic depositors Percent, 2012 Return on equity Percent, 2012 Source: Xac Bank Annual Report, 2012; Khan Bank Annual Report, 2012, MiBanco Annual Report, 2012; Equity Bank Group Annual Report, 2012;l Accleda Bank Financial Highlights, 2012; Bank Supervision Annual Report, 2012, Central Bank of Kenya; Supervision Annual Report, 2012, National Bank of Cambodia; The Mix Market; Global Findex Database, World Bank (2012) Success of hidden champions in low-income banking 22.3 26 42.9 44.3 18.7 28.8 25.2 31
    12. 12. Replication and acceleration of digital success 12 Source: Safaricom M-Pesa timeline on http://nchinampesa.safaricom.co.ke/; Financial Inclusion Tracker Survey and Financial Inclusion Insights, Intermedia; CGAP Team Analysis Mobile money users in years since inception (users in millions) • Total reach: 90+% of adults in Kenya (68% for M-PESA only) • 47% of adults in Tanzania, a competitive market with four providers • Steep growth potential in Bangladesh – only 9% of adults reached to date0 2 4 6 8 10 12 14 16 18 1 2 3 4 5 6 7 M-Pesa Tanzania B-Kash
    13. 13. Potential for rapid scaling of new services • Banking partner with no previous retail business • M-Pesa transactions history allows for algorithmic underwriting of small loans • Many first-time borrowers despite steep cost (7.5% fee per month) 13 12 240 1 45 1 Month 12 Months 1 Month 12 Months M-Shwari balances (in millions US$) 20x Savings Loan volumes Source: Company reports; CGAP teams 45x
    14. 14. 14Source: CGAP Teams Continued proliferation of Digital Finance innovations Water Energy Agriculture Transportation Health Microfinance Insurance MOBILE MONEY
    15. 15. 15 Pay-as-you-go access to water: Sarvajal example • “Water ATMs” dispense reverse osmosis-filtered water against pre-paid card charge • ATMs send SMS to indicate water supply and quality levels for remote monitoring • 15 ATM pilot launched in October 2013 with Delhi Water Board at very low cost to consumer (0.005 US$/liter) Source: Company reports; CGAP teams
    16. 16. Public sector actions: India example Example actions to date Source: RBI Committee Report on Comprehensive Financial Services; CGAP teams Financial Access Promoting infrastructure • UIDAI enrolling 600m with option to open bank account Rule making • Agent regulation expanded on eligibility and non-exclusivity Driving volume • Digitization of G2P (NREGA, pensions, fertilizer, food, kerosene, etc.) 16 • New types of banking licenses - Payment banks (no credit) - Wholesale banks (no deposits) • Digital finance-friendly regulations - Opening up to telcos • Aggressive aspirations - Leveraging national ID, G2P digitization and opening for non-banks to create basic access for everyone by 2016 2014 RBI Committee recommendations
    17. 17. CGAP V: Recommitment and priorities 20 CGAP’s Mission Shared Vision A world where everyone can access and effectively use the financial services they need to improve their lives To improve the lives of poor people by spurring innovations and advancing knowledge and solutions that promote responsible and inclusive financial markets Five Year Priorities  Understanding Demand to Effectively Deliver for the Poor  Financial Innovation for Smallholder Families  Developing Robust Provider Ecosystems  Building an Enabling and Protective Policy Environment globally  Promoting Effective and Responsible Funding for Financial Inclusion
    18. 18. 18 Re-introducing the Vargas-Hancco family
    19. 19. Helping people improve their lives 19 The Vargas/Hancco Family
    20. 20. Advancing financial inclusion to improve the lives of the poor www.cgap.org

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